Average count of position stable since 2000
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I wrote a simple long only strategy that included some averaging down and it tested quite well on the DJI. It opens a position based on some conditions and then if it was on the market and the same conditions were met again and the price was lower than the position price then it bought again.
I thought that I would analyse what the all time average position size was at each sell and the results were interesting and clearly show that since around 2000 this market has been very different to before 2000.
At the beginning of the test period the average is erratic which is to be expected due to a small data sample (but also clearly some bigger trade sizes) but once the average begins to smooth out it starts falling from about 3.2 in 1984 down to 2.5 in 2000. Around the end of the 90’s computerised trading started to take off and it is interesting to see that since then this sort of strategies average position size has stayed fairly stable at around 2.5 positions opened for each average down. It would seem that testing on data prior to 2000 is not going to tell us much about how markets are behaving today for this sort of strategy.
Just thought I would post it for interest….
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Here is the same strategy on the same market but just averaged since the beginning of 1999.
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